The New Zealand dollar gained more than half a cent following a cut in the Official Cash Rate by the Reserve Bank to 3% on Thursday.
The cut brought the OCR to a record low, but it was smaller than some were expecting. The previous rate was 3%.
The dollar was at 50.6 US cents before the announcement at 9am on Thursday and was trading at 51.2 US cents at 11.30am. The Trade Weighted Index was at 52.53.
RBNZ Governor, Allan Bollard, said the cut is in response to both extreme global uncertaintly and the deterioration of the New Zealand economy.
But Dr Bollard said he is unlikely to cut the Official Cash Rate below 2% even if the recession gets worse.
He said the flow of funds from overseas risks being cut off if interest rates are too low to attract foreign investors.
The reduction was the sixth consecutive cut since July 2008 when the rate was 8.25%.
The new rate is the lowest since the OCR was introduced in March 1999, when it was set at 4.5%.